Proposed changes to bank regulation in the EU and the United States are set to make it all but impossible for AIB to retain its holdings in Poland and the US.


New Basel II rules preventing banks from counting subsidiary equity in their core capital could cost AIB €400m in reserves for its 70% stake in Bank Zachodni WBK, while US president Barack Obama's pledge to levy large banks to pay for the US bailout is expected to cut seriously into the distributed earning the bank gets for its minority shareholding in M&T Bank.


Analysts expect the two new bits of regulation to change AIB's calculus about asset disposals, forcing the board to capitulate and sell its two big foreign interests.


M&T was always likely to be sold, but BZWBK was considered the jewel in AIB's crown because of its robust earnings potential. However, if the Basel reforms are adopted, the cost of the holding in capital terms in the short term may outweigh the value of future profits.


According to calculations by NCB Stockbrokers, AIB consolidates 100% of BZWBK's risk-weighted assets while owning only 70.4% of the subsidiary. To compensate for this, the group has been allowed to include €400m of equity in its capital ratios relating to the minority interest portion.


Perhaps more importantly, the combined capital value of these two holdings has risen by €840m to over €2bn in the last few months as result of the equity rally, according to Davy estimates. The bank may find the chance for such a massive capital gain too good to pass up, regardless of the new rules.


"AIB has received some criticism for its quietness or lack of action with regard to capital raisings since it guided the market back in September that it intended to raise €2bn of capital. Interestingly, however, as management has delayed – pending greater certainty on group capital requirements – this has resulted in a gain of €840m in the capital value of the stake sales," Davy said in a research note.


AIB is awaiting the EU's verdict on the business plan the bank was required to submit for receiving €3.5bn in state support last year.